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| Disputed term/author/ism | Author |
Entry |
Reference |
|---|---|---|---|
| Business Cycle | Economic Theories | Rothbard III 1007 Business cycles//economic theories/Rothbard: The business-cycle analysis set forth here has essentially been that of the "Austrian" School, originated and developed by Ludwig von Mises and some of his students.(1) Full employment/VsMises/VsAustrian school/VsRothbard: A prominent criticism of this theory is that it "assumes the existence of full employment" or that its analysis holds only after "full employment" has been attained. Credit expansion: Before that point, say the critics, credit expansion will beneficently put these factors to work and not generate further malinvestments or cycles. RothbardVsVs: But, in the first place, inflation will put no unemployed factors to work unless their owners, though holding out for a money price higher than their marginal value product, are blindly content to accept the necessarily Iower real price when it is camouflaged as a rise in the "cost of living." And credit expansion generates further cycles whether or not there are unemployed factors. It creates more distortions and malinvestments, delays indefinitely the process of recovery from the previous boom, and makes necessary an eventually far more grueling recovery to adjust to the new malinvestments as well as to the old. Capital goods: If idle capital goods are now set to work, this "idle capacity" is the hangover effect of previous wasteful malinvestments, and hence is really sub-marginal and not worth bringing into production. Putting the capital to work again will only redouble the distortions.(2) 1. Mises first presented the "Austrian theory" in a notable section ofhis Theory of Money and credit, pp. 346-66. For a more developed statement, see his Human Action, New Haven, Conn.: Yale University Press, 1949. Reprinted by the Ludwig von Mises Institute, 1998. pp. 547-83. For F.A. Hayek's important contributions, see especially his Prices and Production, and also his Monetary Theory and the Trade Cycle (London: Jonathan Cape, 1933), and Profits, Interest, and Investment. Other works in the Misesian tradition include Robbins, The Great Depression, and Fritz Machlup, The Stock Market, Credit, and Capital Formation (New York: Macmillan & Co., 1940). 2. See Mises, Human Action, New Haven, Conn.: Yale University Press, 1949. Reprinted by the Ludwig von Mises Institute, 1998. pp. 5 77-78; and Hayek, Prices and Production, pp. 96-99. |
Rothbard II Murray N. Rothbard Classical Economics. An Austrian Perspective on the History of Economic Thought. Cheltenham, UK: Edward Elgar Publishing. Cheltenham 1995 Rothbard III Murray N. Rothbard Man, Economy and State with Power and Market. Study Edition Auburn, Alabama 1962, 1970, 2009 Rothbard IV Murray N. Rothbard The Essential von Mises Auburn, Alabama 1988 Rothbard V Murray N. Rothbard Power and Market: Government and the Economy Kansas City 1977 |
| Free Market | Rothbard | Rothbard III 176 Free market/contracts/Rothbard: (…) contracts assigning away the will of an individual cannot be enforced in such a market, because the will of each person is by its nature inalienable. >Goods/Rothbard. On the other hand, if the individual made such a contract and received another’s property in exchange, he must forfeit part or all of the property when he decides to terminate the agreement. We shall see that fraud may be considered as theft, because one individual receives the other’s property but does not fulfill his part of the exchange bargain, thereby taking the other’s property without his consent. This case provides the clue to the role of contract and its enforcement in the free society. Contract must be considered as an agreed-upon exchange between two persons of two goods, present or future. >Contracts. Rothbard III 177 On the other hand, take the case of a promise to contribute personal services without an advance exchange of property. Thus, suppose that a movie actor agrees to act in three pictures for a certain studio for a year. Before receiving any goods in exchange (salary), he breaks the contract and decides not to perform the work. Since his personal will is inalienable, he cannot, on the free market, be forced to perform the work there. Further, since he has received none of the movie company property in exchange, he has committed no theft, and thus the contract cannot be enforced on the free market. >Invasion of Property/Rothbard. Rothbard III 616 Free market/Rothbard: International Trade/Rothbard: trade.” In a purely free market, (…) there can be no such thing as an “international trade” problem. The laws of the free market (…) apply, (…) to the whole extent of the market, i.e., to the “world” or the “civilized world.” Wages: Wage rates will tend toward uniformity for the same labor in different geographical areas in precisely the same way as from industry to industry or firm to firm. >Geographical factors. Rothbard III 622 VsFree market/VsRothbard/Rothbard: Many people criticize the free market as follows: Yes, we agree that production and prices will be allocated on the free market in a way best fitted to serve the needs of the consumers. But this law is necessarily based on a given initial distribution of income among the consumers; some consumers begin with only a little money, others with a great deal. The market system of production can be commended only if the original distribution of income meets with our approval. Distribution/RothbardVsVs: This initial distribution of income (or rather of money assets) did not originate in thin air, however. It, too, was the necessary consequence of a market allocation of prices and production. It was the consequence of serving the needs of previous consumers. (…) after the initial period, the effect of unjust incomes becomes less and less important. For in order to keep and increase their ill-gotten gains, the former robbers, now that a free economy is established, have to invest and recoup their funds so as to serve consumers correctly. If they are not fit for this task, and their exploits in predation have certainly not trained them for it, then entrepreneurial losses will diminish their assets and shift them to more able producers. >Consumer’s Sovereignty/Hutt, >Consumer’s Sovereignty/Rothbard. Rothbard III 640 Free market/Rothbard: Criticism of steel owners for not producing "enough" steel or of coffee growers for not producing "enough" coffee also implies the existence of a caste system, whereby a certain caste is permanently designated to produce Steel, another caste to grow coffee, etc. Only in such a caste society would such criticism make sense. Yet the free market is the reverse of the caste system; indeed, choice between alternatives implies mobility between alternatives, and this mobility obviously holds for entrepreneurs or lenders with money to invest in production. >Cartels/Rothbard, >Cartels/Mises. Rothbard III 748 Free market/patens/copyright/inventions/Rothbard: On the free market, there would therefore be no such thing as patents. There would, however, be copyright for any inventor or creator who made use of it, and this copyright would be perpetual, not limited to a certain number ofyears. Obviously, to be fully the property of an individual, a good has to be permanently and perpetually the property of the man and his heirs and assigns. If the State decrees that a man's property ceases at a certain date, this means that the State is the real owner and that it simply grants the man use of the property for a certain period of time.(1) >Patents/Rothbard, >Copyright/Rothbard, >Inventions/Rothbard, >Research funding/Rothbard. Rothbard III 803 Purely free market/Rothbard: In a purely free market where fraud cannot, by definition, occur, all bank receipts will be genuine, i.e., will represent only actual gold or silver in the vaults. In that case, all the bank's money-substitutes (warehouse receipts) will also be money certificates, i.e., each receipt genuinely certifies the actual existence of the money in its vaults. The amount of gold kept in bank vaults for redemption purposes is called its "reserves," and the policy of issuing only genuine receipts is therefore a policy of " 100-percent reserves" of cash to demand liabilities (liabilities that must be paid on demand.(2) Reserve: However, the term "reserve" is a misleading one, because it assumes that the bank owns the gold and independently decides how much of it to keep on hand. Actually, it is not the bank that owns the gold, but its depositors.(3) >Bank Reserve/Rothbard. 1. For a legal hint on the proper distinction between copyright and monopoly, see F.E. Skone James, “Copyright” in Encyclopedia Britannica (14th ed.; London, 1929), VI, 415–16. For the views of nineteenth-century economists on patents, see Fritz Machlup and Edith T. Penrose, “The Patent Controversy in the Nineteenth Century,” Journal of Economic History, May, 1950, pp. 1–29. Also see Fritz Machlup, An Economic Review of the Patent System (Washington, D.C.: United States Government Printing Office, 1958). 2. Time deposits are, legally, future claims, since banks have a legal right to delay payment 30 days. Moreover, they do not pass as final media of exchange. The latter fact is not determining, however, since a secure claim to a money-substitute is itself part of the money supply. "Idle" cash balances are kept as "time deposits," just as gold bullion is a more "idle" form of money than coins. The deciding factor, perhaps, is that the 30-day limit is virtually a dead letter, for if a "savings" bank should impose it, a bankrupting "run" on the bank would ensue. Furthermore, actual payments are sometimes made by "cashiers' checks" on time deposits. Thus, "time" deposits now function as demand deposits and should be treated as part of the money supply. If banks wished to act as genuine savings banks, borrowing and lending credit, they could issue I.0.U's for specified lengths of time, due at definite future dates. Then no confusion or possible "counterfeiting" could arise. 3. Such items as bills oflading, pawn tickets, and dock warrants have been warehouse receipts rooted in the specific objects deposited, in contrast to the loose "general deposits" where a homogeneous good can be returned. See W. Stanley Jevons, Money and the Mechanism ofExchange (16th ed.; London: Kegan Paul, Trench, Trübner & Co., 1907), pp. 201-11. |
Rothbard II Murray N. Rothbard Classical Economics. An Austrian Perspective on the History of Economic Thought. Cheltenham, UK: Edward Elgar Publishing. Cheltenham 1995 Rothbard III Murray N. Rothbard Man, Economy and State with Power and Market. Study Edition Auburn, Alabama 1962, 1970, 2009 Rothbard IV Murray N. Rothbard The Essential von Mises Auburn, Alabama 1988 Rothbard V Murray N. Rothbard Power and Market: Government and the Economy Kansas City 1977 |
| Geographical Factors | Economic Theories | Rothbard III 819 Geographic factors/Economic theories/Rothbard: Rothbard: The purchasing power of money will (…) tend to remain equal in all places where the money is used, whether or not national boundaries happen to intervene. >Geographical factors/Rothbard. Economic theoriesVsRothbard: Some people contend that, on the contrary, there do exist permanent differences in the purchasing power of money from place to place. For example, they point to the fact that prices for food in restaurants are higher in New York City than in Peoria. Quality of life: For most people, however, New York has certain definite advantages over Peoria. It has a vastly wider range of goods and services available to the consumer, including theaters, concerts, colleges, high-quality jewelry and clothing, and stockbrokerage houses. There is a great difference between the commodity "restaurant service in New York" and the commodity "restaurant service in Peoria." The former allows the purchaser to remain in New York and to enjoy its various advantages. Thus, the two are distinct goods, and the fact that the price of restaurant service is greater in New York signifies that the preponderance of individuals on the market value the former more highly and consider it a commodity of higher quality.(1) Transport/RothbardVs: Costs of transport, however, do introduce a qualification into this analysis. Suppose that the PPM in Detroit is slightly higher than in Rochester. We would expect gold to flow from Rochester to Detroit, spending relatively more on goods in the latter place, until the PPM's (purchasing power of the monetary unit) are equalized. If, however, the PPM in Detroit is higher by an amount smaller than the transport cost of shipping the gold from Rochester, then relative PPM's have a leeway to differ within the zone of shipping costs of gold. It would then be too expensive to ship gold to Detroit to take advantage of the higher PPM. The interspatial PPM's may vary in either direction within this cost-of-transport margin.(2) PPM: Many critics allege that the PPM cannot be uniform throughout the world because some goods are not transferable from one locale to another. Times Square or Niagara Falls, for example, cannot be transferred from one region to another; they are specific to their locale. Therefore, it is alleged, the equalization process can take place only for those goods which "enter into interregional trade"; it does not apply to the general PPM. Rothbard III 820 RothbardVs: Plausible as it seems, this objection is completely fallacious. a) In the firstpPlace, disparate goods like Times Square and other main streets are different goods, so that there is no reason to expect them to have the same price. b) Secondly, so long as one commodity can be traded, the PPM can be equalized. The composition of the PPM may well be changed, but this does not refute the fact of equalization. The process of equalization can be deduced from the fact of human action, even though (…) the PPM cannot be measured, since its composition does not remain the same. Stores/real estates/locations: Finally, since any good can be traded, what is there to prevent, for example, Oshkosh capital from buying a building on Times Square? The Oshkosh capitalists need not literally transport a good back to Oshkosh in order to buy it and make money from their investment. Rothbard: Every good, then, "enters into interregional trade"; no distinction between "domestic" and "interregional" (or "international") goods can be made. Putrchasing power: Thus, suppose the PPM is higher in Oshkosh than in New York. New Yorkers tend to buy more in Oshkosh, and Oshkoshians will buy less in New York. This does not only mean that New York will buy more Oshkosh wheat, or that Oshkosh will buy less New York clothing. It also means that New Yorkers will invest in real estate or theaters in Oshkosh, while Oshkoshians will sell some of their New York holdings. >Clearing/Rothbard. 1. For an appreciation of Mises’ achievement in clarifying this problem, see Wu, An Outline of International Price Theories, pp. 127, 232-34. 2. (…) interlocal clearing can greatly narrow these limits. |
Rothbard II Murray N. Rothbard Classical Economics. An Austrian Perspective on the History of Economic Thought. Cheltenham, UK: Edward Elgar Publishing. Cheltenham 1995 Rothbard III Murray N. Rothbard Man, Economy and State with Power and Market. Study Edition Auburn, Alabama 1962, 1970, 2009 Rothbard IV Murray N. Rothbard The Essential von Mises Auburn, Alabama 1988 Rothbard V Murray N. Rothbard Power and Market: Government and the Economy Kansas City 1977 |
| Government Bonds | Rothbard | Rothbard III 1025 Government Bonds/Rothbard: The major source of government revenue is taxation. Another source is government borrowing. Government borrowing from the banking system is really a form of inflation: it creates new money-substitutes that go first to the government and then diffuse, with each step of spending, into the community. >Inflation/Rothbard, >Money-substitutes/Rothbard. Government bonds: This is a process entirely different from borrowing from the public, which is not inflationary, for the latter transfers saved funds from private to governmental hands rather than create new funds. Its economic effect is to divert savings from the channels most desired by the consumers and to shift them to the uses desired by government offcials. Savings: Hence, from the point of view of the consumers, borrowing from the public wastes savings. Capital structure/Society: The consequences of this waste are a Iowering of the capital structure of the society and a Iowering of the general standard of living in the present and the future. Interest rates: Diversion and waste of savings from investment causes interest rates to be higher than they otherwise would, since now private uses must compete With government demands. Public borrowing strikes at individual savings more effectively even than taxation, for it specifically lures away savings rather than taxing income in general. VsRothbard: It might be objected that lending to the government is voluntary and is therefore equivalent to any other voluntary contribution to the government; the "diversion" of funds is something desired by the consumers and hence by society.(1) VsGovernment Bonds/RothbardVsVs: Yet the process is "voluntary" only in a one-sided way. For we must not forget that the government enters the time market as a bearer of coercion and as a guarantor that it will use this coercion to obtain funds for repayment. The government is armed by coercion With a crucial power denied to all other People on the market; it is always assured of funds, whether by taxation or by inflation. Risks: (…) the risk component in the interest rate paid by the government will be Iower than that paid by any other borrowers.(2) Rothbard III 1026 Voluntariness: Lending to government, therefore, may be voluntary, but the process is hardly voluntary when considered as a whole. It is rather a voluntary participation in future confiscation to be committed by the government. In fact, lending to government twice involves diversion of private funds to the government: once when the Ioan is made, and private savings are diverted to government spending; and again when the government taxes or inflates (or borrows again) to obtain the money to repay the Ioan. Coercion: Then, once more, a coerced diversion takes place from private producers to the government, the proceeds of which, after payment of the bureaucracy for handling services, accrues to the government bondholders. The latter have thus become a part of the state apparatus and are engaging in a "relation of state" with the tax-paying producers.(3) „We“/society/state/Rothbard: The ingenious slogan that the public debt does not matter because "we owe it to ourselves" is clearly absurd. The crucial question is: Who is the "we" and who are the "ourselves"? Analysis of the world must be individualistic and not holistic. Certain people owe money to certain other people, and it is precisely this fact that makes the borrowing as well as the taxing process important. For we might just as well say that taxes are unimportant for the same reason.(4) Rothbard III 1027 RothbardVsRightists/RothbardVsRight-wing: Many "right-wing" opponents of public borrowing, on the other hand, have greatly exaggerated the dangers of the public debt (…). 1) It is obvious that the government cannot become "insolvent" like private individuals - for it can always obtain money by coercion, while private citizens cannot. 2) Further, the periodic agitation that the government "reduce the public debt" generally forgets that - short of outright repudiation -the debt can be reduced only by increasing, at least for a time, the tax and/or inflation in society. Social utility: Social utility can therefore not be enhanced by debt-reduction, except by the method of repudiation - the one way that the public debt can be Iowered without a concomitant increase in fiscal coercion. Repudiation: Repudiation would also have the further merit (from the standpoint of the free market) of casting a pall on all future government credit, so that the government could no longer so easily divert savings to government use. It is therefore one of the most curious and inconsistent features of the history of politico-economic thought that it is precisely the "right-wingers," the presumed champions of the free market, who attack repudiation most strongly and who insist on as swift a payment of the public debt as possible.(5) 1. A recent objection of this sort appears in James M. Buchanan, Public Principles of Public Debt (Homewood, Ill.: Richard D. Irwin, 1958), especially pp. 104-05. 2. It is incorrect, however, to say that government Ioans are "riskless" and therefore that the interest yield on government bonds may be taken to be the pure interest rate. Governments may always repudiate their obligations if they wish, or they may be overturned and their successors may refuse to honor the I.0.U.'s. 3. Hence, despite Buchanan's criticism, the classical economists such as Mill were right: the public debt is a double burden on the free market; in the present, because resources are withdrawn from private to unproduc- tive governmental employment; and in the future, when private citizens are taxed to pay the debt. Indeed, for Buchanan to be right, and the public debt to be no burden, two extreme conditions would have to be met: (1) the bondholder would have to tear up his bond, so that the Ioan would be a genuinely voluntary contribution to the government; and (2) the government would have to be a totally voluntary institution, subsisting on voluntary payments alone, not just for this particular debt, but for all in transactions with the rest of society. Cf. Buchanan, Public Principles of Public Debt. 4. In the same way, we would have to assert that the Jews killed by the Nazis during World War II really committed suicide: "They did it to themselves." 5. For the rare exception of a libertarian Who recognizes the merit of repudiation from a free-market point ofview, see Frank Chodorov, "Don't Buy Bonds," analysis, Vol. IV, No. 9 (July, 1948), pp. 1-2. |
Rothbard II Murray N. Rothbard Classical Economics. An Austrian Perspective on the History of Economic Thought. Cheltenham, UK: Edward Elgar Publishing. Cheltenham 1995 Rothbard III Murray N. Rothbard Man, Economy and State with Power and Market. Study Edition Auburn, Alabama 1962, 1970, 2009 Rothbard IV Murray N. Rothbard The Essential von Mises Auburn, Alabama 1988 Rothbard V Murray N. Rothbard Power and Market: Government and the Economy Kansas City 1977 |
| Land (Economics) | Ingalls | Rothbard III 175 Land/IngallsVsRothbard/Ingalls/Rothbard: Ingalls advocated continuing ownership only for actual occupiers and personal users of the land. This is in contrast to original ownership by the first user. The Ingalls system would, in the first place, bring about a highly uneconomic allocation of land factors. Land sites where small “homestead” holdings are uneconomic would be forced into use in spite of this, and land would be prevented from entering other lines of use greatly demanded by consumers. Some land would be artificially and coercively withdrawn from use, since land that could not be used by owners in person would have to lie idle. Furthermore, this theory is self-contradictory, since it would not really permit ownership at all. One of the prime conditions of ownership is the right to buy, sell, and dispose of property as the owner or owners see fit. Since small holders would not have the right to sell to nonoccupying large holders, the small holders would not really be owners of the land at all. The result is that on the ownership question, the Ingalls thesis reverts, in the final analysis, to the Georgist view that Society (in the alleged person of the State) should own the land.(1) 1. On Ingalls and his doctrines, see James J. Martin, Men Against the State (DeKalb, Ill.: Adrian Allen Associates, 1953), pp. 142–52, 220 ff., 246 ff. Also cf. Benjamin R. Tucker, Instead of a Book (2nd ed.; New York: B.R. Tucker, 1897), pp. 299–357, for the views of Ingalls’ most able disciple. Despite the underlying similarity and their many economic errors, the Ingalls-Tucker group launched some interesting and effective critiques of the Georgist position. These take on value in the light of the excessive kindness often accorded to Georgist doctrines by economists. |
Ingalls I Joshua K. Ingalls Economic Equities: A Compend of the Natural Laws of Industrial Production and Exchange. Michigan 2007 (Reprint) Rothbard II Murray N. Rothbard Classical Economics. An Austrian Perspective on the History of Economic Thought. Cheltenham, UK: Edward Elgar Publishing. Cheltenham 1995 Rothbard III Murray N. Rothbard Man, Economy and State with Power and Market. Study Edition Auburn, Alabama 1962, 1970, 2009 Rothbard IV Murray N. Rothbard The Essential von Mises Auburn, Alabama 1988 Rothbard V Murray N. Rothbard Power and Market: Government and the Economy Kansas City 1977 |
| Nature | Rothbard | Rothbard III 169 Nature/economics/ownership/Rothbard: (…) the origin of all property is ultimately traceable to the appropriation of an unused nature-given factor by a man and his “mixing” his labor with this natural factor to produce a capital good or a consumers’ good. >Action/Rothbard, >Property/Rothbard, >Labour/Rothbard, >Land/Rothbard. For when we trace back through gifts and through exchanges, we must reach a man and an unowned natural resource. In a free society, any piece of nature that has never been used is unowned and is subject to a man’s ownership through his first use or mixing of his labor with this resource. How will an individual’s title to the nature-given factor be determined? If Columbus lands on a new continent, is it legitimate for him to proclaim all the new continent his own, or even that sector “as far as his eye can see”? Clearly, this would not be the case in the free society that we are postulating. Columbus or Crusoe would have to use the land, to “cultivate” it in some way, before he could be asserted to own. Rothbard III 170 There is no requirement, however, that land continue to be used in order for it to continue to be a man’s property. Interaction: (…) the question whether or not labor has been mixed with land is irrelevant to its market price or capital value; in catallactics, the past is of no interest. Rothbard III 171 VsRothbard: Some critics, especially the Henry Georgists, assert that, while a man or his assigns may be entitled to the produce of his own labor or anything exchanged for it, he is not entitled to an original, nature-given factor, a “gift of nature.” For one man to appropriate this gift is alleged to be an invasion of a common heritage that all men deserve to use equally. RothbardVsVs: This is a self-contradictory position, however. A man cannot produce anything without the co-operation of original nature-given factors, if only as standing room. In order to produce and possess any capital good or consumers’ good, therefore, he must appropriate and use an original nature-given factor. He cannot form products purely out of his labor alone; (…). >Animals/Rothbard, >Land/Rothbard. Rothbard III 172 Production/Rothbard: We must remember, also, what “production” entails. When man “produces,” he does not create matter. He uses given materials and transforms and rearranges them into goods that he desires. >Production/Rothbard, >Goods/Rothbard. Property/ownership: When we are considering legitimacy of title, the fact that land always embodies past labor becomes extremely important.(1) If animals are also “land” in the sense of given original nature factors, so are water and air. We have seen that “air” is inappropriable, a condition of human welfare rather than a scarce good that can be owned. However, this is true only of air for breathing under usual conditions. For example, if some people want their air to be changed, or “conditioned,” then they will have to pay for this service, and the “conditioned air” becomes a scarce good that is owned by its producers. Radio waves: Furthermore, if we understand by “air” the medium for the transmission of such things as radio waves and television images, there is only a limited quantity of wave lengths available for radio and for television purposes. This scarce factor is appropriable and ownable by man. In a free society, ownership of these channels would accrue to individuals just like that of land or animals: the first users obtain the property.(2) 1. See the vivid discussion by Edmond About, Handbook of Social Economy (London: Strahan & Co., 1872), pp. 19–30. Even urban sites embody much past labor. Cf. Herbert B. Dorau and Albert G. Hinman, Urban Land Economics (New York: Macmillan & Co., 1928), pp. 205–13. 2. [Ronald] Coase has demonstrated that Federal ownership of airwaves was arrogated, in the 1920’s, not so much to alleviate a preceding “chaos,” as to forestall this very acquisition of private property rights in airwaves, which the courts were in the process of establishing according to common law principles. Ronald H. Coase, “The Federal Communications Commission,” Journal of Law and Economics, October, 1959, pp. 5, 30-32. |
Rothbard II Murray N. Rothbard Classical Economics. An Austrian Perspective on the History of Economic Thought. Cheltenham, UK: Edward Elgar Publishing. Cheltenham 1995 Rothbard III Murray N. Rothbard Man, Economy and State with Power and Market. Study Edition Auburn, Alabama 1962, 1970, 2009 Rothbard IV Murray N. Rothbard The Essential von Mises Auburn, Alabama 1988 Rothbard V Murray N. Rothbard Power and Market: Government and the Economy Kansas City 1977 |
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